Putting paid to dodgy debit orders

Over the past few years there has been a significant increase in debit orders linked to bank accounts without permission (a mandate) from consumers. On the other hand, irresponsible consumer behaviour, where customers dispute debit orders that do have valid mandates, has also become a huge concern for the banking industry.

In the light of these trends, the South African Reserve Bank asked the Payments Association of South Africa (Pasa) to find a solution.

An industry project aimed at enhancing and eventually replacing certain types of debit orders, and thereby contributing substantially to the safety and efficiency of the debit order system, was started in 2013. Now close to implementation, the project will deliver a new type of debit order, called DebiCheck.

Under the new system, a debit order will be processed to your bank account only if the mandate for the order has been electronically confirmed by you. This should result in a decline in the number of invalid debit orders, as well as in the number of consumer disputes, Pasa says.

For DebiCheck debit orders, you will be required to confirm once off, electronically, the debit order information with your bank. This will put you in control of the debit order and let you know exactly what will be processed to your bank account. The banks have developed a number of ways in which they will obtain such confirmation, such as through messaging to cellphones, banking applications and online banking.

A DebiCheck debit order will not be processed by the bank if it does not comply with the conditions agreed to by you.

“This project is one of the largest interbank payment projects we have had to date – it is an entire eco-system change, with notable infrastructure changes that will affect banks, consumers and merchants,” says Walter Volker, the chief executive of Pasa.

DebiCheck is being phased in over two years, with a pilot project starting this month and widespread ramp-up from February next year. Participating companies will slowly convert to the new system, helping the National Payment System to remain stable while ensuring adequate time for consumer awareness and education.